Wheat imports are expected to contract to 8.6 million tonnes following Indonesian limitations on feed-grade wheat imports.
Although Indonesia faced tough weather conditions in 2015, the situation has reversed. It is expected that most major food crop producing areas, especially those in Sumatera and Java, will receive sufficient rainfall throughout 2016.
Assuming normal weather, corn production is expected to increase to 10.2 million tonnes in 2016-17, compared with the previous estimate of 9.6 million tonnes. Corn imports for 2015-16 are estimated to further decline to 2 million tonnes due to continued corn import restrictions imposed by the government.
For rice, additional rain boosted paddy production in rain-fed areas during the 2015-16 third crop cycle. As a result, 2015-16 and 2016-17 rice production estimates were unchanged. Rice import estimates are expected to decline.
Indonesian wheat consumption in 2015-16 was estimated at 9.386 million tonnes, up from the previous estimate of 7.5 million tonnes. The increase mainly was driven by higher food industry consumption through the growth of the instant noodle market and new to market bakeries.
In response to low local supplies and import barriers, feed mills are substituting corn with imported feed wheat. The Indonesian Flour Mills Association (APTINDO) reports that 22 feed mills imported feed wheat, resulting in a feed wheat import surge since September 2015.
Feed millers responded to corn shortages instigated by the government’s self-sufficiency policy with a surge in feed wheat imports. However, the Ministry of Agriculture (MOA) stopped issuing import recommendations for feed wheat in June, after recognizing that feed wheat imports posed a threat to this policy. MOA’s shutdown of feed wheat imports, combined with weak exchange rates is expected to slow Indonesian wheat import growth from an average annual rate of 6%-7% to approximately 5%.
At these levels, Indonesian wheat imports are expected to contract to 8.6 million tonnes in 2016-17. Wheat exports to Indonesia during the 2015-16 market year were led by Australia (37.36%), Ukraine (17.82%), Canada (15.95%), Argentina (13.22%) and the United States (8%).
Australia’s majority market share is due to the noodle industry’s preference for Australian standard white wheat, price and Australia’s close proximity. Considering these factors, U.S. wheat exports to Indonesia in 2015-16 are estimated to reach 799,000 tonnes. Importers note that 2015-16 Indonesian wheat flour imports declined by 5% to 196,915 tonnes of wheat equivalent, compared with 207,660 tonnes of wheat equivalent imported in 2014-15. The decline is mainly due to the continued weakness of the rupiah against the U.S. dollar.Domestic flour dominated the market throughout calendar year 2016, with a 98% market share. According to Global Trade Atlas data, Turkey held the largest market share of wheat flour exports to Indonesia (63%), followed by Ukraine (16%) and Sri Lanka (9%) in 2015-16.